Iowa flood buyouts could cost millions

Jun 17, 2013

CEDAR RAPIDS (AP) — More than 100 victims of the 2008 Iowa floods could receive buyouts well above their property's assessed value before the disaster struck.

Those buyouts — some more than $1 million above pre-flood assessments — are in line to cost taxpayers an extra $9.3 million in the city of Cedar Rapids alone, an investigation by the Des Moines Register found.

Property owners in Cedar Rapids received the higher payouts after appealing the city's appraised values and paying for their own private assessment with a licensed appraiser.

Despite sometimes wide disparities in appraised values, the newspaper found that those private assessments were generally accepted by city and state officials without question or without an independent review.

"The values on those buildings have been questioned from the beginning by the public that pays attention, but it is also a concern that no third party was brought in to assess these properties," said Linda Seger, president of the Cedar Rapids Northwest Neighborhood Association.

Since 2008 in Cedar Rapids — where floodwaters swamped 1,300 city blocks — about 1,300 homes and commercial properties in flood-prone areas have been purchased, mostly using federal grant money.

Generally, the city buys out a property by paying the assessor's pre-flood estimated value — plus 7 percent, which is partly to compensate owners for a lag between city assessments that possibly could have led to higher values. But owners of at least 104 properties have successfully contested their buyout values as being too low and hired private assessors to bolster their claims.

As a result, the city has approved an appraised value for one business owner of $4.7 million — $2.2 million more than the city's initial valuation, records show. Other businesses and homeowners received tens of thousands of dollars more when they were bought out.

Some of the private appraisals stated that the pre-flood values were partially based on financial statements provided to them by property owners. Although the private appraisals recommended independent reviews of the financial records to verify they were correct, neither Cedar Rapids nor the state did so.

"We relied primarily on the licensed appraiser. They have professional standards they have to uphold, and we're not going to try to second-guess them," said Joe O'Hern, the city's executive administrator for development services.

Cedar Rapids Mayor Ron Corbett defended the city's actions, saying city staff relied on the work of a contracted company, ProSource Technologies, to present them with finalized buyout offers.

Jason Alt, an employee of the Minneapolis-based company, declined to comment, referring questions to Cedar Rapids city employee Rita Rasmussen.

Rasmussen, a senior real estate officer who signed documents to approve the increased values, said ProSource provided feedback on how federal regulations or program guidelines relate to the buyouts but did not give the city recommendations.

Tim Waddell, an administrator for the state economic development authority, acknowledged this month that the agency has never instructed the city to conduct an independent review of any of the costliest appeals.

Instead, the agency required independent reviews of three other properties — one was a vacant lot — where owners appealed the city's assessments and provided private appraisals that concluded the properties were worth more. Those reviews worked as tests, Waddell said.

The agency concluded that Cedar Rapids' appeals process — at least in those three cases — was fair since each of the three independent appraisals agreed with or showed the private appraisals were lower than the independent review.